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Unfortunately, there are a great many misconceptions out there about inflation. Since I can't possibly address them all in a short blog post, I figured I'd take on just one: the idea that it is a net loss for everyone. The reason people believe this is partly because of the manner in which most economists teach the concept and also because we naturally transfer how a phenomenon affects us individually to the macro level. If inflation reduces my standard of living, then it must be doing the same to everyone. But what this ignores is the simple and fundamental fact that if I’m paying more, someone else is getting more. Every expenditure for one person is income for another. Hence, inflation can’t possibly be a net loss for everyone, but is instead a redistribution of income.…. Inflation
Topics:
Mike Norman considers the following as important: income redistribution, inflation
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Unfortunately, there are a great many misconceptions out there about inflation. Since I can't possibly address them all in a short blog post, I figured I'd take on just one: the idea that it is a net loss for everyone. The reason people believe this is partly because of the manner in which most economists teach the concept and also because we naturally transfer how a phenomenon affects us individually to the macro level. If inflation reduces my standard of living, then it must be doing the same to everyone. But what this ignores is the simple and fundamental fact that if I’m paying more, someone else is getting more. Every expenditure for one person is income for another. Hence, inflation can’t possibly be a net loss for everyone, but is instead a redistribution of income.…. Inflation
Topics:
Mike Norman considers the following as important: income redistribution, inflation
This could be interesting, too:
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Unfortunately, there are a great many misconceptions out there about inflation. Since I can't possibly address them all in a short blog post, I figured I'd take on just one: the idea that it is a net loss for everyone. The reason people believe this is partly because of the manner in which most economists teach the concept and also because we naturally transfer how a phenomenon affects us individually to the macro level. If inflation reduces my standard of living, then it must be doing the same to everyone. But what this ignores is the simple and fundamental fact that if I’m paying more, someone else is getting more. Every expenditure for one person is income for another. Hence, inflation can’t possibly be a net loss for everyone, but is instead a redistribution of income.….
Inflation is always and everywhere a redistribution of income. If you truly want to understand an episode of inflation, you have to ask, "Who's winning from this?"
Sometimes your answer will lead you to the conclusion that it's bad and sometimes not. From a broader perspective, what this means for government policy is that it should be tailored to the specific situation. We should not treat all inflation as the same....
Forbes — Pragmatic Economics
Inflation…Huh…What Is It Good For?
John T. Harvey | Professor of Economics, Texas Christian University
Inflation…Huh…What Is It Good For?
John T. Harvey | Professor of Economics, Texas Christian University